Trump’s tariffs hit Asia’s factories, trigger region-wide slowdown: Details here

Asia’s manufacturing sector is under pressure as US President Donald Trump’s renewed tariff offensive sends shockwaves through global trade.

From Vietnam to South Korea, Taiwan to Japan, factory activity contracted sharply in May 2025, with Purchasing Managers’ Index (PMI) readings slipping below the 50-mark that separates growth from contraction, according to S&P Global data cited by Reuters.

The downturn highlights growing uncertainty as Trump’s protectionist policies, aimed at rebalancing American trade—begin to disrupt supply chains and dent export-driven economies across the region.

Vietnam’s exports slump amid tariff shock

Vietnam’s manufacturing sector is bearing the brunt of Washington’s aggressive stance. New export orders declined for the seventh straight month in May, pushing factory activity deeper into contraction.

Input costs fell for the first time in nearly two years, signalling weak demand and easing global commodity prices, according to S&P Global, cited by Bloomberg.

The pain stems largely from a 46 per cent reciprocal tariff the US imposed on Vietnamese goods in April. The US is a key destination for Vietnamese exports, and the tariff shock has shaken business confidence.

Still, there is some optimism. A few firms cited “tariff stability” and improved production outlooks amid early-stage trade deals with the US and UK, S&P Global noted.

South Korea’s output plunges, steel sector under pressure

South Korea’s PMI fell to 47.7 in May, the fourth straight month of contraction. New orders dropped at the sharpest rate in five years, and factory output posted its worst performance in nearly three years, Reuters reported.

The most severe blow is being felt in the steel and aluminium sectors. Trump has doubled tariffs to 50 per cent on Korean metals, triggering alarm among exporters. South Korea’s Trade Ministry said it is working to “minimise the damage,” while urging calm, according to Reuters.

Bank of Korea Governor Rhee Chang-yong warned of a domino effect, noting that South Korea’s deep supply chain ties with China could amplify the tariff impact. South Korea’s exports to the US fell 8.1 per cent in May, a sharp reversal after a brief spike during Trump’s 90-day tariff pause, Bloomberg reported.

Taiwan and Indonesia's demand weakens

Taiwan’s manufacturing sector contracted for the second straight month. Export sales fell, and companies cited client hesitation and uncertain demand conditions driven by US tariff uncertainty.

Businesses have begun cutting back on purchases and hiring, according to S&P Global, reported by Bloomberg.

In Indonesia, the picture is similarly bleak. New orders fell at their steepest pace since August 2021, indicating broader weakness in consumer demand across the ASEAN region, according to Reuters.

Japan's prolonged contraction continues

Japan’s PMI came in at 49.4 in May, marking the 11th consecutive month of contraction, according to Reuters.

Though the downturn is less severe than in neighbouring economies, it points to long-term structural weakness in Japanese manufacturing, driven by sluggish exports and high input costs.

Philippines' growth momentum slows

The Philippines once a regional outlier is now also showing signs of slowing. Factory activity continued to expand in May, but at a much slower pace, as regional headwinds spread, Bloomberg reported.

Businesses are reportedly becoming more cautious as demand from major export markets softens.

US-China's fresh trade flare-up threatens fragile truce

In early 2025, President Trump imposed a sweeping 145 per cent tariff on Chinese imports, citing trade imbalances and national security concerns. Beijing hit back with retaliatory duties of up to 125 per cent.

While both sides briefly agreed to scale back some tariffs during talks in Geneva last month, relations have soured again.

The US recently imposed new export restrictions on chip design software and AI technologies and revoked visas for Chinese students. It also banned exports of jet engine parts to China.

According to Bloomberg, the US Trade Representative accused China of failing to uphold the Geneva agreement by not accelerating exports of critical minerals.

Beijing, in turn, called the moves a “serious violation” of the truce. China’s Ministry of Commerce said it would take “resolute and forceful measures” if Washington continued to escalate, rejecting the US claims as “unjustified.”